(VOVworld) The State Bank of Vietnam (SBV) has just lowered major interest rate caps, including deposit rates by 1%. The central bank has also decided to open up equity, real estate and consumer loans to pump capital into the economy and boost business operations. Such moves are considered reasonable steps as inflation moderates.
Right after the central bank’s rate cut decision, the Bank for Investment and Development of Vietnam (BIDV) slashed its annual ceiling rates to 14.5%, its medium - term lending rates to 16%, and its short term equity rates to 17%. Pham Quang Tung, Deputy General Director of BIDV told VOV: “We plan to announce credit packages for prioritized areas and target groups of clients in the coming days. In addition to interest cuts, we will publicize how much our clients can access in loans”.
According to Do Minh Toan, Deputy General Director of Asia Bank, the rate cut from 13% to 12% is right on time given improved bank liquidity and slowing inflation. Toan said the move will help lower capital costs for the economy and have little effect on inflation before the end of this year: “The economy’s positive signs induced us to go ahead with rate cuts to boost growth”.
Tran Xuan Quang, Deputy General Director of Hoang Hai Commercial Joint Stock Bank, said his bank and clients had anticipated the rate lowering. He added it’s more important that the bank should be well prepared in terms of service quality to stabilize its liquidity:“We think that the State Bank’s policy rate cut is a good sign for the economy based on inflation’s downtrend. It also signals an imminent lending interest cut in the near future to help enterprises revive and grow”.
Governor Nguyen Van Binh said the new policy was adopted with caution to reduce inflation to below 10%, boost businesses and ensure reasonable GDP growth:“We believe that if real estate is revived, other sectors such as cement and steel production will be able to clear their inventories and generate more jobs, creating flows of capital and improve banks’ bad debts”.
Government resolution No11 on inflation control, macro-economic stabilization and social welfare urges for prudent but flexible monetary policies. In the first quarter of this year, the State Bank of Vietnam removed liquidity obstacles. Bank deposits by credit organizations now stand at 3 billion USD, nearly 1 billion USD higher than the compulsory reserve. The government has over the past 3 months issued 1.5 billion USD worth of 3- year bonds. Since mid-March the State Bank has issued 1.5 billion USD worth of notes. These moves are parts of government efforts to stabilize economic development.